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                                     1. Shopping and Negotiating
                                         2. Your Credit Report
                                            3. To Learn More
                                  4. Sample Questions for Lenders

                                    Shopping and Negotiating

If you decide that the timing's right for a home equity loan, ask your friends or family for
recommendations of lenders. Then, comparison shop. Comparing loan plans will help you get a
better deal.

Contact several lenders, not just the ones that send you mail, call you or knock on your door. Talk
with banks, savings and loans, credit unions, mortgage companies and mortgage brokers.
Remember, brokers don't lend money; they help arrange loans.

Ask all the lenders you interview to explain the loan plans they have for you. If you don't
understand any loan terms or conditions, ask questions. They could mean higher costs. Knowing
just the amount of the monthly payment or the interest rate is not enough. Pay close attention to
fees, including:

      application or loan processing fee;
      origination or underwriting fee;
      lender or funding fee;
      appraisal fee;
      document preparation and recording fees;
      broker fees which may be quoted as points, origination fees or interest rate add-on.

If points and other fees are added to your loan amount, you'll pay more to finance them.

Also ask for your credit score. Credit scoring is a system creditors use to help determine whether to
give you credit. Information about you and your credit experiences -- like you bill-paying history,
the number and type of accounts you have, late payments collection actions, outstanding debt and
the age of your accounts -- is collected from your credit application and your credit report.
Creditors compare this information to the credit performance of consumers with similar profiles. A
credit scoring system awards point for each factor, which helps predict who is most likely to repay a
debt. A total number of points -- your credit score -- helps predict how creditworthy you are
(meaning how likely it is that you will repay a loan and make the payments when they're due).

Negotiate with more than one lender. Don't be afraid to make lenders and brokers compete for
your business by letting them know you're shopping for the best deal. Ask each lender to lower the
points, fees or interest rate. And ask each to meet -- or beat -- the terms of the other lenders.

Before you sign, read the loan closing papers carefully. If the loan isn't what you expected or
wanted, don't sign the loan. Either negotiate changes or walk away. You also generally have the
right to cancel the deal for any reason -- and without penalty -- within three days after signing the
loan papers. The lender must return any money you've paid to date.
                                       Your Credit Report

Because your credit report is an important part of many credit scoring systems, it's very important
to make sure it's accurate before you submit a credit application. To get copies of your report,
contact the three major credit reporting agencies:

Equifax: (800) 685-1111 or
Experian (formerly TRW): (888) 397-3742 or
Trans Union: (800) 916-8800 or

These agencies may charge you up to $8.50 for your credit report.

                                         To Learn More

For more information about shopping for a home equity loan, and a glossary of home loan terms,
call the FTC's Consumer response center toll-free at 1-877-FTC-HELP (382-4357). Ask for a free
copy of Looking for the Best Mortgage: Shop, Compare, Negotiate; High-rate, High-fee Loan
(Section 32 Mortgages); and Home Equity Loans: The Three-Day Cancellation Rule. Or visit the
FTC online at

                                 Sample Questions for Lenders

                                                      Lender A        Lender B        Lender C
What are the monthly payments?
What is the Annual Percentage Rate (APR)?
(The cost of credit expressed as a yearly rate;
includes the interest rate, points, broker fees and
other credit charges.)
What is the interest rate?
(The cost of borrowing money expressed as a
percentage rate.)
Will the interest rate change?
       How often?
       By how much?
What will you have to pay in points?
What will you have to pay in fees?
       Application or loan processing fee
       Origination or underwriting fee
       Lender or funding fee
       Appraisal fee
       Document preparation and recording
Are any of the application fees refundable if you
don't get the loan?
How many years will you have to repay the loan?
Is this an installment loan or a line of credit?
Is there a balloon payment?
What are the total closing costs?
If you use a broker, how will the broker be paid?
What is the penalty for late or missed payments?
Does the loan include optional credit insurance?
(You don't have to accept optional credit
insurance to get your loan.)
If you want optional credit insurance, can you
pay for it monthly instead of financing the
premiums as part of your loan?
Did you get a copy of your credit score?
Can you afford this loan?

The FTC (Federal Trade Commission) works for the consumer to prevent fraudulent, deceptive
and unfair business practices in the marketplace, and to provide information to help consumers
spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer
topics, call toll-free 1-877-FTC-HELP (1-877-382-4357) or use the online complaint form. The FTC
enters Internet, telemarketing, identity theft and other fraud-related complaints in to Consumer
Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement
agencies worldwide.

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